India’s foreign exchange reserves surged by whopping $2.671 billion to $366.781 billion for the week ended March 2017 on account of increase in foreign currency assets, the Reserve Bank said today.
In the previous week, the reserves had risen by $98.6 million to $364.109 billion.
Foreign currency assets (FCAs), a major component of the overall reserves, rose by $2.645 billion to $343.101 billion in the reporting week, the RBI said.
Expressed in US dollar terms, FCAs include the effects of appreciation/depreciation of non—US currencies, such as the euro, pound and the yen held in the reserves.
Gold reserves remained unchanged at $19.914 billion.
The special drawing rights with the International Monetary Fund was up by $10 million to $1.444 billion; India’s reserve position with the Fund, too, increased by $15.9 million to $2.320 billion, RBI said.
After making Aadhaar mandatory for filing income tax returns and applying for a permanent account number (PAN), the government has moved to make Aadhaar-based e-KYC (know your customer) mandatory for mobile phone connections.
In a notification late Thursday, the department of telecommunications (DoT) directed all mobile phone service providers to reverify existing customers, prepaid and postpaid, using their unique Aadhaar identity number and biometric details. They were told to complete the exercise by early next year.
Aadhaar-based e-KYC would also be mandatory for customers procuring new SIM cards.
It is another step towards making the use of Aadhaar all-pervasive in a country where it is already being used to better target beneficiaries of some government subsidies and welfare programmes.
On Tuesday, the government said Aadhaar would be mandatory for filing income tax returns as well as for obtaining and retaining the permanent account number (PAN) that taxpayers need to quote in their returns. From 1 July, every taxpayer will have to quote Aadhaar while applying for a PAN and when filing tax returns. Existing PAN holders will have to disclose their Aadhaar numbers to the government by a date that will be specified later. In case they fail to intimate their Aadhaar number, taxpayers will have the PAN allotted to them deemed invalid.
The move to link mobile phone connections to Aadhaar, administered by the Unique Identification Authority of India (UIDAI), comes after the Supreme Court said in February that all phone numbers in India should have verified users. The court said this during a hearing on a case brought by Lokniti Foundation, a non-profit organization.
Although the Supreme Court stopped short of saying that Aadhaar has to be used to verify users, the government seems to have decided that linking the unique identity number to mobile connections will be the best way to go about this.
“A meeting was held on 13.02.2017 in the department with the telecom industry wherein UIDAI, Trai and PMO representatives also participated to discuss the way forward to implement the directions of Hon’ble Supreme Court,” said the notification issued by DoT.
Trai is short for the Telecom Regulatory Authority of India and PMO for the Prime Minister’s Office.
Any unverified mobile phone number, or any number that is not linked to Aadhaar, will be illegal after 6 February 2018.
The government has directed telecom companies to intimate their existing subscribers about the re-verification process through all means possible, including through advertisements in newspapers and text messages.
The licensees have also been directed to send a “verification code” to the mobile numbers of subscribers to ensure that SIM cards are physically available with the subscribers before initiating the e-KYC process.
“I am unclear about the benefit that will arise out of the exercise where we will have to re-evaluate all the subscribers,” said Arpita Pal Agarwal, partner and leader—telecom industry practice—at consultancy PricewaterhouseCoopers India Pvt. Ltd. “It will add additional costs to the (telecom) sector, which it at the moment cannot afford.”
The Supreme Court previously said in an interim ruling that the use of Aadhaar should not be mandatory in delivering government benefits. Hearings in the case and a final ruling are still pending. The legislation that conferred statutory status on the Aadhaar project too said its use wouldn’t be mandatory.
“The government can decide with the legislature on making Aadhaar compulsory for the various schemes or activities. However, I don’t understand why are they making it compulsory for some schemes on their own when a decision is still pending before the Supreme Court. They can be easily challenged,” said Rahul Matthan, partner at law firm Trilegal and a Mint columnist.
According to former rural development secretary N.C. Saxena, the delivery of benefits offered by government schemes should be linked to Aadhaar.
Non-banking finance companies could well outpace commercial banks, struggling to grow amid muted loan expansion and bad loan burden, said global rating company Moody’s.
But, NBFCs too are exposed to certain risks emanating from their fast-faced growth in loan against properties, which they are in a position to mitigate with larger share in mortgaged loans.
Non-bank financial companies (NBFCs) in India (Baa3 positive) will demonstrate broadly stable asset quality, but delinquencies will likely rise over the next 1-2 quarters, as demonetisation adversely affects collections across asset classes, said Moody’s Investors Service in a note.
“While the 90+days delinquency rate in the commercial vehicle (CV) loan segment largely stabilized in the first half of the fiscal year ending 31 March 2017, such delinquencies should build up in the near term due to the adverse impact of demonetisation and tighter recognition norms for non-performing assets (NPAs),” said Alka Anbarasu, a Moody’s Vice President and Senior Analyst.
Moody’s also notes that the growth in loans against property (LAP) has outpaced overall retail credit growth in recent years, but relatively loose underwriting practices–combined with intensifying competition – will translate into higher asset quality risk for this segment.
Furthermore, over the past 3 years, NBFCs have gained some market share in the origination of retail lending, on the back of the faster growth exhibited by such entities when compared to the banks.
This is particularly the case when compared to public sector banks, which face significant challenges on their asset quality and overall solvency profiles.
“Nevertheless, we expect that competitive pressures from the banking sector will remain intense as banks are increasing targeting of the retail segment to offset weakness in their corporate lending. In addition, retail lending, particularly housing loans, is more capital efficient for the banks,” said Anbarasu.
And, while the NBFCs’ capitalization levels are adequate, with average Tier 1 ratios in excess of 14%, capital generation will lag credit growth. Access to external capital will therefore be key in sustaining the NBFCs’ growth momentum.
On funding, Moody’s expects that the NBFCs’ funding profiles will broadly remain stable, and funding costs should moderate gradually, given the reduction in systemic rates.
In addition, the NBFCs’ profitability and capital, as well as funding and liquidity levels, will stay broadly stable.
The NBFCs are growing at a fast pace, and have gained market share in the origination of retail credit. And, their share of LAP pose a potential source of risk, with such loans growing at a rapid compound annual growth rate of about 25% over the last four years compared to 17% for overall retail credit.
Moody’s says that the NBFCs’ exposure to potential risks from LAP is broadly offset by their share of stable mortgage loans, because favorable demographics and economics, tax incentives for home loans and an increasingly affordable housing segment support asset quality.
Moody’s expects that the loss given default for both home loans and LAP will be limited, in light of the underlying collateral.
The government on Tuesday proposed making Aadhaar, the unique number issued by the Unique Identification Authority of India, mandatory for filing of income-tax returns as well as for obtaining and retaining the permanent account number (PAN). It also proposed making cash transactions above Rs2 lakh illegal, reducing the limit from the earlier proposed one of Rs3 lakh, as per the official amendments to the finance bill 2017 moved by the government.
Once passed by Parliament, these amendments will further tighten the noose around tax evaders and aid the government’s drive against black money.
According to the amendments, from 1 July, every taxpayer will have to quote Aadhaar while applying for a PAN and while filing income-tax returns. Further, existing PAN holders will have to disclose their Aadhaar numbers to the government by a date that will be specified later. In case of failure to intimate the Aadhaar number, the PAN allotted to the person shall be deemed invalid.
The government’s move to link Aadhaar will help in weeding out tax evaders who have multiple PANs. Though the income-tax department has been seeding PAN with Aadhaar for the last few years, the pace of the linkage has not been very good.
Taxpayers who do not have an Aadhaar number are required to quote their Aadhaar enrolment number, the amendments said.
The finance bill is expected to receive the Lok Sabha’s nod on Wednesday.
The government’s proposal to cap cash transactions at Rs 2 lakh will create a paper trail for all high-value transactions and hit purchases of real estate, jewellery and luxury goods.
While presenting the Union budget, finance minister Arun Jaitley had on 1 February proposed that the legal limit for cash transactions would be Rs 3 lakh, in line with the recommendations of the Supreme Court-constituted Special Investigation Team (SIT) on black money.
Revenue secretary Hasmukh Adhia tweeted on Tuesday that the penalty for a violation would be a fine equivalent to the value of the transaction.
Non-banking finance companies could well outpace commercial banks, struggling to grow amid muted loan expansion and bad loan burden, said global rating company Moody’s.
But, NBFCs too are exposed to certain risks emanating from their fast-faced growth in loan against properties, which they are in a position to mitigate with larger share in mortgaged loans.
Non-bank financial companies (NBFCs) in India (Baa3 positive) will demonstrate broadly stable asset quality, but delinquencies will likely rise over the next 1-2 quarters, as demonetisation adversely affects collections across asset classes, said Moody’s Investors Service in a note.
“While the 90+days delinquency rate in the commercial vehicle (CV) loan segment largely stabilized in the first half of the fiscal year ending 31 March 2017, such delinquencies should build up in the near term due to the adverse impact of demonetisation and tighter recognition norms for non-performing assets (NPAs),” said Alka Anbarasu, a Moody’s Vice President and Senior Analyst.
Moody’s also notes that the growth in loans against property (LAP) has outpaced overall retail credit growth in recent years, but relatively loose underwriting practices–combined with intensifying competition – will translate into higher asset quality risk for this segment.
Furthermore, over the past 3 years, NBFCs have gained some market share in the origination of retail lending, on the back of the faster growth exhibited by such entities when compared to the banks.
This is particularly the case when compared to public sector banks, which face significant challenges on their asset quality and overall solvency profiles.
“Nevertheless, we expect that competitive pressures from the banking sector will remain intense as banks are increasing targeting of the retail segment to offset weakness in their corporate lending. In addition, retail lending, particularly housing loans, is more capital efficient for the banks,” said Anbarasu.
And, while the NBFCs’ capitalization levels are adequate, with average Tier 1 ratios in excess of 14%, capital generation will lag credit growth. Access to external capital will therefore be key in sustaining the NBFCs’ growth momentum.
On funding, Moody’s expects that the NBFCs’ funding profiles will broadly remain stable, and funding costs should moderate gradually, given the reduction in systemic rates.
In addition, the NBFCs’ profitability and capital, as well as funding and liquidity levels, will stay broadly stable.
The NBFCs are growing at a fast pace, and have gained market share in the origination of retail credit. And, their share of LAP pose a potential source of risk, with such loans growing at a rapid compound annual growth rate of about 25% over the last four years compared to 17% for overall retail credit.
Moody’s says that the NBFCs’ exposure to potential risks from LAP is broadly offset by their share of stable mortgage loans, because favorable demographics and economics, tax incentives for home loans and an increasingly affordable housing segment support asset quality.
Moody’s expects that the loss given default for both home loans and LAP will be limited, in light of the underlying collateral.
India and Russia are setting up a USD 1 billion fund to promote mutual investments in infrastructure and technology projects, Commerce and Industry Minister Nirmala Sitharaman has said.
Both the countries would contribute USD 500 million to the fund, Sitharaman said while addressing India-Russia Business Forum at the ongoing International Engineering Sourcing Show (IESS) here yesterday.
While the Russian funds would be channeled through Russian Direct Investment Fund (RDIF), Indian contribution will be accrued from National Investment and Infrastructure Fund.
Sitharaman elaborated upon other measures being taken by Russia and India to scale up their economic engagement and to boost bilateral trade and investment.
As part of these initiatives, the India Russia CEO Forum will hold its meeting this year at a mutually convenient date. The forum was constituted in St Petersburg in June 2016.
Foreign Direct Investment (FDI) from Russia is estimated at USD 1.2 billion till date while Indian investment in Russia is around USD 4.9 billion.
“There is tremendous potential for enhancing such investments,” the minister said, adding that initiatives like Make-in-India would catalyse Russian investment in several Indian sectors including Defence production.
“The Make-in-India initiative was launched by the government in order to encourage businesses to manufacture products in the country, creating additional jobs for local population. This is a major drive to foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing infrastructure,” she said.
India and Russia are engaged in robust cooperation in the energy sector, including collaborations in civil nuclear energy, hydrocarbons and renewable energy.
India’s economic growth is expected to pick up once the effects of cash shortages linked to the currency exchange initiative fade, the International Monetary Fund (IMF) has said. Prime Minister Narendra Modi on November 8 had announced scrapping of old Rs 500 and Rs 1000 notes, pulling out 86 per cent of the total currency in circulation.
Noting that India’s fiscal deficit is expected to continue narrowing in the near-term, the IMF in its note titled ‘Global Prospects and Policy Challenges’ said, “Further subsidy reduction and tax reforms, including a robust design and full implementation of the Goods and Services Tax (GST), are necessary to attain medium-term fiscal consolidation plans.”
It further observed that in some emerging economies like China and India reducing excessive corporate leverage and improving bank’s balance sheets or adopting more prudent risk-management practices, including to reduce currency and maturity balance sheet mismatches, will help reduce vulnerabilities to global financial conditions, possible capital outflows, and sharp currency movements.
The government last month pegged GDP growth at 7.1 per cent for 2016-17 despite the note ban. The Central Statistics Office (CSO) had put the figure for October-December at 7 per cent, compared to 7.4 per cent in the second quarter and 7.2 per cent in the first.
India’s growth was higher than China’s 6.8 per cent for October-December of 2016. The growth numbers were better than those projected by RBI (6.9 per cent) and international agencies like IMF (6.6 per cent) and OECD (7 per cent) in view of the cash recall. The Organisation for Economic Cooperation and Development (OECD) in February last year had projected the country’s growth at 7.4 per cent for 2016-17. Buoyed by higher-than-expected growth, Finance Minister Arun Jaitley has also said a 7 per cent expansion in the third quarter belies the exaggerated claims of note ban impact on the rural economy.